Changing constraints

Building a startup is seeing opportunities and trying to make them come true. How you get there will be impacted by constraints on your behavior. Such constraints might be competitors’ behavior, laws and norms, capital need, access to capital, access to talent and many other things.

For startups and unprofitable technology companies the access to capital has gone down and cost of capital has increased since 2021 (from being extremely cheap and widely accessible to being more normally priced and probably a little less than normally available).

This leads to cash being much more valuable than 18 months ago, as cash is more difficult and more expensive to replace.

The result is that current financial results (cashflow and profit/loss) become more important than revenue growth.

With a recession in the air, the only course of action to lower losses is general cost cuts including layoffs. And that is what are seeing.

Author: Henrik Torstensson

Partner at Alliance VC. Investing in Nordic early-stage tech startups.

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